Impact of Taxation on Economic Growth: Empirical Evidence from Pakistan
Purpose: Governments rely on taxes, but a high tax rate can slow economic growth. Fiscal policy objectives can be achieved most effectively by lowering tax collection costs and boosting economic growth through efficient taxation. This study aims to find the impact of tax revenue on Pakistan's...
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| Format: | Article |
| Language: | English |
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CSRC Publishing
2022-06-01
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| Series: | Journal of Business and Social Review in Emerging Economies |
| Subjects: | |
| Online Access: | https://www.publishing.globalcsrc.org/ojs/index.php/jbsee/article/view/2309 |
| _version_ | 1818492888570396672 |
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| author | Muhammad Nouman Shafiq Muhammad Azhar Bhatti Furrukh Bashir Muhammad Atif Nawaz |
| author_facet | Muhammad Nouman Shafiq Muhammad Azhar Bhatti Furrukh Bashir Muhammad Atif Nawaz |
| author_sort | Muhammad Nouman Shafiq |
| collection | DOAJ |
| description |
Purpose: Governments rely on taxes, but a high tax rate can slow economic growth. Fiscal policy objectives can be achieved most effectively by lowering tax collection costs and boosting economic growth through efficient taxation. This study aims to find the impact of tax revenue on Pakistan's economic growth.
Design/Methodology/Approach: The time series dataset spanning 1985–2021 is used for the current analysis. GDP is used as the dependent variable, while tax revenue and other fiscal policy variables like government spending, inflation, gross fixed capital formation and current account balance are used as the explanatory variables. The stationarity of the data is checked using the ADF test. The results of the ARDL bound test, which is used to determine whether there is a long-term link between the variables and a short-term relationship, indicate a long-term relationship.
Findings: Current analysis reveals that tax revenue and inflation have a negative and significant impact while government expenditures and gross fixed capital formation have a positive and significant impact on the economic growth of Pakistan.
Implications/Originality/Value: According to the study's results, Pakistan's government should ensure that tax rates are set at the right level to bring in enough money to pay for government spending that helps the economy grow.
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| first_indexed | 2024-12-10T17:48:12Z |
| format | Article |
| id | doaj.art-1b71f27e0cb24f6faeb4e1dfc71bbf67 |
| institution | Directory Open Access Journal |
| issn | 2519-089X 2519-0326 |
| language | English |
| last_indexed | 2024-12-10T17:48:12Z |
| publishDate | 2022-06-01 |
| publisher | CSRC Publishing |
| record_format | Article |
| series | Journal of Business and Social Review in Emerging Economies |
| spelling | doaj.art-1b71f27e0cb24f6faeb4e1dfc71bbf672022-12-22T01:39:09ZengCSRC PublishingJournal of Business and Social Review in Emerging Economies2519-089X2519-03262022-06-018210.26710/jbsee.v8i2.2309Impact of Taxation on Economic Growth: Empirical Evidence from PakistanMuhammad Nouman Shafiq0Muhammad Azhar Bhatti1Furrukh Bashir2Muhammad Atif Nawaz3School of Economics and Finance, Xi'an Jiaotong University, Xi'an, Shaanxi Province, ChinaThe Islamia University of Bahawalpur, PakistanBahauddin Zakariya University, Multan, PakistanThe Islamia University of Bahawalpur, Pakistan Purpose: Governments rely on taxes, but a high tax rate can slow economic growth. Fiscal policy objectives can be achieved most effectively by lowering tax collection costs and boosting economic growth through efficient taxation. This study aims to find the impact of tax revenue on Pakistan's economic growth. Design/Methodology/Approach: The time series dataset spanning 1985–2021 is used for the current analysis. GDP is used as the dependent variable, while tax revenue and other fiscal policy variables like government spending, inflation, gross fixed capital formation and current account balance are used as the explanatory variables. The stationarity of the data is checked using the ADF test. The results of the ARDL bound test, which is used to determine whether there is a long-term link between the variables and a short-term relationship, indicate a long-term relationship. Findings: Current analysis reveals that tax revenue and inflation have a negative and significant impact while government expenditures and gross fixed capital formation have a positive and significant impact on the economic growth of Pakistan. Implications/Originality/Value: According to the study's results, Pakistan's government should ensure that tax rates are set at the right level to bring in enough money to pay for government spending that helps the economy grow. https://www.publishing.globalcsrc.org/ojs/index.php/jbsee/article/view/2309Economic GrowthTax revenueARDLPakistan |
| spellingShingle | Muhammad Nouman Shafiq Muhammad Azhar Bhatti Furrukh Bashir Muhammad Atif Nawaz Impact of Taxation on Economic Growth: Empirical Evidence from Pakistan Journal of Business and Social Review in Emerging Economies Economic Growth Tax revenue ARDL Pakistan |
| title | Impact of Taxation on Economic Growth: Empirical Evidence from Pakistan |
| title_full | Impact of Taxation on Economic Growth: Empirical Evidence from Pakistan |
| title_fullStr | Impact of Taxation on Economic Growth: Empirical Evidence from Pakistan |
| title_full_unstemmed | Impact of Taxation on Economic Growth: Empirical Evidence from Pakistan |
| title_short | Impact of Taxation on Economic Growth: Empirical Evidence from Pakistan |
| title_sort | impact of taxation on economic growth empirical evidence from pakistan |
| topic | Economic Growth Tax revenue ARDL Pakistan |
| url | https://www.publishing.globalcsrc.org/ojs/index.php/jbsee/article/view/2309 |
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